[sfafdsdf]

The other side of it is that the entire enterprise would theoretically not exist without that initial effort.

While it may not appear fair under certain ethical frameworks for someone to receive free money, it seems to be that the choice is "everyone gets nothing" versus "someone gets more than others because they created it".

in my experience, this is a red herring. I know very few founders who don't work harder after an acquisition or capital investment than before. Those who are sitting on the beach tend to have sold their interest.

[s73v3r]

It's not going to be "everyone gets nothing", because most of the employees have other options open to them. But why am I busting my ass, working those long hours, while you're not, and you're still going to get more than me?

[mindcrime]

But why am I busting my ass, working those long hours, while you're not, and you're still going to get more than me?

Because you're getting paid, presumably. Why does it matter if some hypothetical founder In absentia is making more than you or not? Know your own value and negotiate compensation that seems fair. If you want "free money for laying around" then negotiate a large portion of your own compensation as a percentage of the company's profits (or as stock in a company that offers dividends). Ownership isn't just for the founders.

Anyway, that aside, the truth is, most people in most companies aren't really "busting their ass", at least not all the time. They're coasting, doing just enough to not get fired, and spending plenty of time reading Dilbert, Techcrunch, Hacker News, Facebook, whatever. If people are busting their asses, they probably have what they consider a good reason. Something like:

1. They want a promotion / raise.

2. They are just plain passionate about what they are doing.

3. Their compensation is somehow tied to the performance of the company.

4. They're trying to impress somebody for whatever reason. Maybe so they can go on to start their own company.

5. Insert $WHATEVER.

[s73v3r]

I'm getting paid, but so are they. And seeing something like that makes it so that I work just hard enough to not get fired. Not the kind of extra mile stuff that these companies typically complain that they want to see from their employees.

[mindcrime]

Sure, absolutely. I don't advocate doing any "extra mile" stuff unless you have a damn good reason to. I mean, if you think you're in like to make CEO (or whatever) one day, then by all means, do whatever it takes. Otherwise, my feeling is, conserve as much of your mental/physical/emotional/spiritual/whatever energy as you can, to use on ends that DO matter to you.

[Frondo]

Again, how long after that enterprise has existed should a person get to claim free money? I think that phrasing, "may not appear fair," is kind of a weaselly way to say "rent-seeking is ok and let's keep it" (which is, I get it, a common sentiment among people who think they might be the rentiers some day). I don't think it is good for society, certainly not the one I'd like to live in, though it sure is good for the person getting that free money.

(And yes, I know this is largely in the realm of hypotheticals, because it seldom happens that the owner is totally absent...)

[grey-area]

If you've ever been paid interest on savings, paid into a pension, invested in the stock market, rented out a possession, or taken advantage of your relatively privileged upbringing as leverage over others you're a 'rent seeker' too. It's a meaningless epithet.

It's quite possible and moral for a business owner to invest money in a business, pay their employees a good wage and keep them happy, and extract profit in return for taking on more of the risk, and having capital in the first place. In fact, that's the way most businesses run, and they often depend on investors who merely provide capital too.

Now if they inherited the money, extorted it, or gained it illegally, perhaps you have a case that the situation is unfair, but the mere fact of exploiting capital in order to make more is not in any way morally dubious.

[Frondo]

I don't know of anyone who defines "rent seeking" as broadly as you just have. You're getting at saying that any sort of money-lending with interest is "rent seeking" and that's not what I'm trying to get at either.

And I agree, business owners should be compensated for what they put into a business. Forever, if they don't keep putting something into it? I don't know about that.

[grey-area]

You haven't defined it at all, and I think if you try, you'll find it hard to differentiate between the use of capital to start a business and the use of capital for one of the other activities I listed above which bring in income with no effort. All are using existing capital to earn more.

Forever, if they don't keep putting something into it? I don't know about that.

If you accept that banks should pay interest on deposits (forever), or shares should pay dividends (forever), then you accept that owners should receive money forever for an initial investment, just as other holders of capital do for other investments. There's nothing nefarious or unjust about it.

[beachstartup]

you're creating a straw man with this "forever" business that keeps paying a checked-out owner a huge dividend. you don't like the idea of it because it's impossible.

in reality, over the long term (years), they are either run into the ground, embezzled from, or sold.

management and ownership will always eventually overlap in any sustainable business.

[jamestnz]

I get the moral argument you're making, but there's a practical side to it, too.

In any capitalist system, the fruits (profits) of an income-generating asset (such as a business) accrue to the owners. Assuming that the idea of private property ownership exists, I can't think of any other coherent place for the profits to go, other than the owner.

Sometimes, a business might be an unexpected hit, taking off and generating revenues beyond the wildest dreams of the founder. Suddenly the company is flush with cash. Now assuming all the employees are fairly compensated, and all the company's other financial needs are met, then beyond a small buffer, what is there to do with the excess cash aside from paying it out as a dividend to the owner?

So I guess my point is that we can make moral hypotheticals all day (about whether it's "right" for the owners of a profitable company to get "free" money "forever" without necessarily "doing anything" further), but I'm not sure what other system we could put in place within a capitalist framework. If a company is treating its employees well, meeting all needs, and still generating an operating surplus, where else would you have that money go, if not to the owners?

Also I think your use of the term "rent-seeking" here is incorrect. A business owner receiving "passive" (or at least "not much active involvement") income from the business they own is kinda the antithesis of rent-seeking.

Rent-seeking behaviour is the attempt to increase your share of the wealth, by means other than generating additional wealth. When you're the one who owns a profitable company, you're the one generating that wealth.

The classic example of rent-seeking is someone installing a chain across a river that happens to run through their land, and then starting to charge people to pass through "their" bit of river. They add no value to the economy in doing this, no product is created nor any service rendered; they are simply extracting rents from river-users.

Another example might be when a company seeks to tilt laws/regulations in its favour (e.g. through lobbying), with the intention of increasing the share of the wealth without the business actually having to generate it. Just like the river, no additional wealth is generated as a result of this action: existing wealth is merely being redistributed (toward the rent-seeker) by government policy.

The key concept in rent-seeking being that wealth (the so-called "rent") is being captured by a party (the rent-seeker) without them generating it.

[Frondo]

Where you said...

"Rent-seeking behaviour is the attempt to increase your share of the wealth, by means other than generating additional wealth. When you're the one who owns a profitable company, you're the one generating that wealth."

When you own a company, you and everyone else who shows up that day to work are the ones generating that wealth. Ownership by itself doesn't generate anything. Activity does.

[jsprogrammer]

>Assuming that the idea of private property ownership exists, I can't think of any other coherent place for the profits to go, other than the owner.

You are begging the question.

You start out with the assumption that all benefits accrue to the owner and then repeatedly conclude that the owner should receive all benefits (after distributing a "fair share" to everyone else [of which there is curiously still "extra share" available for the owner {who likely didn't contribute direct effort to help achieve the shares}]).

A business is not an "income-generating asset", it's a collection of individuals and policies that cooperate to achieve some end. Business as income-generating asset is a classic rent-seeker fallacy (although some may get away with it).